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Establishing an energy hub in Trincomalee -II

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Establishing an energy hub in Trincomalee -II
Suitability of Trincomalee for a LNG terminal
Viability of the project
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Outlook for NG use in India

Several analysis reports available in the internet forecast heavy shortfall of NG supply in India in the near future. According to a report prepared by the consultancy firm Mckinsey and quoted in Financial Express, India’s demand for NG will nearly double from the current demand of 166 Mcmd to 320 Mcmd by 2015, and with the inadequacy of domestic supplies, India has no option other than to go for large-scale LNG imports, if it were to shift away from coal in the power sector to comply with India’s voluntary targets under Copenhagen Accord (co-authored by India!) to reduce carbon emissions.

It was also noted that there is an increasing demand for NG in the domestic sector with plans to increase the number of cities supplied with piped NG from the current 40 cities to 200 or more. In the transport sector too, an increase in the demand is expected with more vehicles using CNG. According to a presentation made at a recently held meeting of the Asia Gas Partnership Summit at New Delhi, it has been mentioned that there is a huge opportunity in the LNG sector with the requirement of about US$ 50 billion investment over the next five years for expanding the infrastructure to meet the future demand.

Trincomalee as an energy hub to serve South India

With the anticipated shortfall in the supply of NG in India in the coming years, and the failure of India to secure piped gas supplies from Iran or Turkmenistan, Sri Lanka has the potential to fill that gap by supplying gas through a pipeline to South India from Trincomalee. If India needs natural gas in the Eastern coast, it will be more economical for them to import it as LNG up to Trincomalee and then to get the gas transported to India through a pipeline (for which only the initial capital is required), than importing it as LNG up to a terminal in the Eastern coast yet to be built for which higher freight will have to be paid all the time.

It is proposed that an LNG terminal be built at Trincomalee harbour to serve as an energy hub for the South Asia region. The government could call for proposals from reputed parties to build an LNG terminal on BOOT basis, initially with capacity 5 Mtpy and expandable to 10 Mtpy or more at a later date. In turn, Sri Lanka could offer a suitable site along with the necessary infrastructure facilities to the investor. A pipeline will also have to be laid to transport gas to South India, overland up to the Northern coast and under sea thereafter. A network of pipelines needs to be built within the country too, to distribute the gas to local users.

This facility could then be offered to any other party to import LNG for distribution to direct users after re-gasification, be it to feed power plants or to use as feedstock for the manufacture of such products as urea and other chemicals or to serve industrial zones for generating thermal energy. The terminal at Dhabol has been offered to independent parties to import LNG paying a toll fee to the plant operator. A similar system could be worked out for the Trincomalee terminal too.

A pipeline from Trincomalee will be cheaper to build than building one from Myanmar which is about 900 km over Bangladesh. The distance from Trincomalee to the northern coast overland is about 175 km, while the sea straight is only about 75 km, making the total distance 250 km. to the Indian coast. India is planning to build a high tension DC transmission line to take electricity from Trincomalee to South India once the proposed Sampur coal power plant is commissioned. The costs of such a transmission line and a gas pipe line would be of the same order of magnitude.